yes there might be some inaccuracy but just here to show an idea. The 700$ gain is 46% which effectively leave in the dust most of the index fund, bond and nasdaq in general .
Are you comparing a gain from one position to gains in the index?? To do that, it means you had to place your whole account into that single position. What if the stock didn't move? Were you willing to lose 50-80% of your account value?
Looked briefly, seems to be closely assoc-d with the option pricing model which i have struggled in the past. http://www.investopedia.com/terms/i/iv.asp Will look up again, thanks for inputs except for few noises.
I follow several dozen stocks for the industry I work in as well as free other industry I keel an eye on to reduce the gambling effect. So I tend to get a better shot than pure random pick up. Keeping track of what is happening with the each underlying companies is challenging but I think worth the effort.
No matter how much you know (or think you know) about the stock or the industry - market reaction to earnings is unpredictable. If you trade any strategy and intend to hold through earnings, make sure you have a very good understanding of how IV works. And make sure you have some kind of edge. For example, if you buy a straddle, make sure that this specific stock has history of moving more than expected after earnings. There are tools that can help you to find out. And the most important thing: when holding through earnings, the only risk management tool is position sizing. You are welcome..
Yeah - I've tried this strat. I really like it. It seems to work, but I haven't done it enough. I've also had a big loss when they changed the earnings date and vol collapsed. I used GOOG. Do you have large-scale backtest stats to back it up as a workable strat? Wouldn't strangs be better, since gamma starts moving faster with wings? Also - what criteria for picking stocks do you have for this strategy? Can you recommend a list of stocks that usually behave? Thanks, Kim - it's good to see a thoughtful commentator.
Do I have stats? Yes - our 6 years track record. Straddles are among our bread and butter strategies. Change in earnings dates (or pre-announcement) are among the major risks of this strategy. pre-announcement can actually work in your favor because in many cases it causes the stock to move. Change in earnings date is very rare (assuming the date was previously on the company website and you did not reply on third party sources). Strangles can work as well, but they are more risky. If the stock doesn't move, they will lose more percentage wise. More details: Straddle, Strangle Or Reverse Iron Condor (RIC)?
Nice reply, Kim. Thanks. You said on your TastyTrade critique that certain companies were the worst. Any tickers you especially recommend for the strategy?